Solid results despite challenges - Tiger Brands

Johannesburg - Tiger Brands [JSE:TBS] said in a Sens statement on Thursday that unaudited group results for the six months ended March 31 2017 show group turnover was up 7% to R16.4bn.

In its view the group achieved solid results for the period. Group operating income was up 10% to R2.2bn.

The company has declared an interim dividend of 378 cents per share for the six month period, which represents an increase of 4% compared to the previous interim dividend of 363 cents per share.

Profit before tax from continuing operations increased by 4% to R2.3bn. Earnings per share from continuing operations increased by 2% to 1 036 cents, while headline earnings per share from continuing operations was up 7% to 1 036 cents due to the once-off capital profits from associates of R73m in the comparative period.

Exports and international divisions were, however, negatively impacted by foreign exchange liquidity and rand strength, coupled with a decline in income from associates. Turnover was unchanged at R2.1bn while operating income decreased by 25% to R194m. The performance of the exports division was negatively impacted by the lack of foreign exchange liquidity in many of the countries to which we export, the strict imposition of credit terms as well as an unfavourable product mix.

READ: Dissent amid bonuses

Disposal of EATBI

The disposal of East African Tiger Brands Industries (EATBI) has been concluded with an effective date of April 4 2017, while the disposal of Haco is well progressed. Consequently, both operations have been treated as discontinued operations in these results.

Turnover growth was driven by pricing while overall volumes declined by 3%. There was positive operating leverage as a result of improved pricing and efficiencies, particularly in the domestic business.

Turnover in the domestic business has increased by 8% to R14.3bn, driven primarily by the grains division. Operating income grew by 15% to R2bn, while the operating margin increased to 14.2%. Overall volumes in the domestic business declined by 4% due, in part, to the Easter period falling in March last year compared to April in the current year.

The strengthening of the rand impacted negatively on the performance of the deciduous fruit business relative to the prior period.

After adjusting for once-off capital profits, associate income decreased by 20%, reflecting the challenging operating conditions facing Oceana and Carozzi, as well as the impact of the stronger rand.

Net financing costs of R120m reflect a reduction in financing costs of R35m, driven by lower debt levels, offset by foreign exchange losses on foreign cash and loan balances of R10m.

Food division

A good performance was delivered by the food division in the period under review, driven primarily by groceries. Overall turnover increased by 3% to R5.9bn, while operating income grew by 12%. The focus on recovering cost push inflation experienced in the previous financial year resulted in an overall margin improvement from 10.6% to 11.5%.

The beverages business delivered lower volumes in the period under review. This was largely due to industrial action in the first quarter as well as drought-related water restrictions and electricity disruptions in the second quarter, which negatively impacted service levels. This led to turnover reducing by 8%.

Home, personal care and baby's performance was driven by another strong contribution from the home care category, with overall turnover increasing by 8% to R1.4bn and operating income growing by 25% to R341m.

Net debt decreased by R885m from September 2016. Cash generated from operations increased by 63% to R3bn, driven primarily as a result of enhanced working capital management. Capital expenditure incurred during the period amounted to R383m and is likely to be lower than initially budgeted for the balance of the year, the group said.

The group said the outlook for the balance of the year is particularly challenging, with volumes in the domestic market having significantly slowed in the second quarter, while a recovery on the balance of the continent is not imminent.

Having largely been successful in correcting margins and recovering exceptional cost push, the key challenge will be to manage market share and volume growth without compromising profitability. This will be driven by focused execution, targeted marketing investment to sustain the strength of the company's power brands and appropriate cost control measures.

Its associate companies also face similar challenges for the remainder of the year.